Nirbhay Capital Services Pvt. Ltd. - A SEBI Registered Merchant Banker Presenta tion On Pub lic Issue of Sm a ll & Med ium Enterp rises
Nirbhay Capital Services Pvt. Ltd. - A SEBI Registered Merchant Banker
TABLE OF CONTENTS 4 OVERVIEW OF SME EXCHANGE 5-6 ELIGIBILITY & GUIDELINES 7-8 BENEFITS OF LISTING INTERMEDIARIES, PROCESS & TIMELINE 9-11 COMPLIANCES & KEY REGULATIONS OUR PR 12-15 NIRBHAY CAPITAL SERVICES PRIVATE LIMITED 16 -17 17-38 3
OVERVIEW OF AN SME IPO “SME Exchange” means a trading platform of a recognised stock exchange having nationwide SME EXCHANGE trading terminals permitted by SEBI to list the specified securities issued in accordance with Chapter XB of SEBI (ICDR) and includes a stock Post issue paid up exchange granted recognition for this purpose Post issue paid up but does not include the Main Platform of the capital >Rs. 10 Cr. & capital <=Rs. 10 Cr. SE. <= Rs. 25 Cr. Provides great opportunity to entrepreneurs to raise the equity capital for growth of SMEs. Listing on SME Exchange Provides immense opportunity to investors to invest in the good companies at early stage and it will help unleash the valuation of the company. Voluntary Migration to Main Listing on SME Board Exchange ( with prior approval of Exchange) 4
ELIGIBILITY CRITERIA Criteria BSE Requirements NSE Requirements Companies Act, 1956 or Companies Act. 2013 Companies Act, 1956 or Companies Act, 2013 Incorporation Minimum: Rs. 3 Crores Minimum: No Requirement Post-Issue Paid up Capital (Face Maximum: Rs. 25 Crores Maximum: Rs. 25 Crores Value) Tangible Net Worth Minimum Rs. 3 Crores. No Requirement Minimum: Rs. 3 Crores. No Requirement Net Tangible Assets Distributable net profit for 2 out of 3 Track record of at least 3 years, positive cash Profit Track Record financial accruals for at least 2 financial years and Years a positive net worth. or Networth of minimum Rs. 5 Crores. Website, Demat trading, Shall not have Shall not have been referred to BIFR, Shall Other been not Listing referred to BIFR and shall not have a have a winding up petition and no Conditions winding up petition disciplinary action faced for 3 years. 5
SEBI GUIDELINES Minimum Dilution : 26.25% of Post Issue Market Making : Compulsory for 3 years, • • Capital (25% to Public and 5% of the share provides stability to the stock price. offered to Public to the Market Maker i.e. 1.25% (5% of 25%). Market Maker: Stock broker registered with • Minimum Subscribers Required : 50 allottees • SME Exchange. Migration to Main Board : After 2 years Underwriting : 100% issue should be • • underwritten Trading Time: Same as Main Board Trading Lot : Minimum Trading Lot of Rs. • • 1,00,000. Public Issue through SME Exchange shall list the specified securities in accordance with the Chapter XB of SEBI ICDR Regulations. Draft Offer Document although required to be filed with Stock Exchange and SEBI, SEBI shall not issue any observation on the Offer Document. 6
BENEFITS OF LISTING TO COMPANIES Capital for expansion and long term working capital • Reduces debt burden • IMPACT ON Improves credit rating and lowers financing cost • FINANCIALS Enhanced market perception leads to higher sales • Increased Visibility of the Company boosting marketing efforts IMPACT ON • Value creation for Existing Shareholder and encouragement for innovation BRANDING • Raises company's profile with customers, suppliers, investors, financial institutions and the • media. Incentive for employees as listed shares can be used as an effective HR tool. • Expands Investor Base generating capital creation as secondary placements • Generates an independent valuation of the company by the market • Greater Participation by PE/VC in SMEs as an exit route is available • IMPACT ON Marketability of the company would be enhanced • FUNDING Greater transparency & disclosures leading to business & financial best practices. OTHER • Good growth companies have a chance to migrate to Main board . BENEFITS • Taxation Benefits to Investors - long term capital gain exempt from tax upon listing of shares. • Cost of Listing on SME Platform Lower than Main Board. • 7
BENEFITS OF LISTING TO SHAREHOLDERS Benefits of Long Term Capital Wealth Creation Liquidity Gains Tax • Promoters • Greater liquidity in the public • Becoming a public Company market can lead to better Holding of 20% of Post Issue Share establishes a market for the valuation for shares Capital to be locked in for 3 years , . Company’s shares post which Long Term Capital Gains (LTCG) @10% from tax on sale of • Provides its investors an efficient shares. • In turn, it will enhance the wealth and regulated place to trade of the investors multifold. shares. Holding in excess of 20% , to be locked in for 1 year , post which LTCG @10% from Tax on sale of shares. • Existing (Non Promoter) Long Term Capital Gains Tax & significant decrease in Short Term Capital Gains Tax Shareholders: Capital Gains Tax Unlisted Listed Sale of shares after listing and completion of statutory 1 year lock Long term capital gains 20% 10% * in, will not attract Long Term Capital Gains Tax. Short term capital gains 30%** 15% *effective from 01.04.18 ** depending upon the income slab of the 8 assesse.
REGULATORY BODIES & INTERMEDIARIES Merchant Banker Stock Exchange, SEBI Market Maker(s) Underwriter to the Issue Bankers, Registrars & Legal Advisors Registrar of Companies Auditors & Company Secretary Ad Agency, Grading Agency & Others 9
KEY MILESTONES IN IPO PROCESS An IPO life cycle could take between four to six months, from planning the IPO to the initial listing during which number of decisions have to be made and criteria must be satisfied. NCSPL, as the Lead Manager, works Listing w ith the Company through every Pricing the issue stage mentioned here Marketing the Issue Draft Offer Document and Offer Document Detailed due diligence: Financial, Business and Legal Preparation Pre IPO-readiness assessment Understanding, Analysis and Structuring 10
INDICATIVE IPO TIMELINE Incorporate SE Obtain listing Marketing of the Board Meeting comments, if any, Issue and trading to approve Issue in RHP/ Prospectus approvals Due Diligence & Observations/ File RHP/ Drafting Approval from Prospectus with SEs ROC T + 101 T + 104 T + 68 T + 67 T + 45 T + 10 T + 47 T + 62 T + 83 T + 84 T + 94 T + 95 T + 97 T + 5 T Issue Opens Receive SE go- Allotment Research ahead to RHP/ Presentation Prospectus Transfer funds from Public Issue Kick off Meeting File DRHP/ Draft File RHP / A/c to Company/ Prospectus with Prospectus with Offeror A/c SE Issue Closes SEBI & SE T: Trigger Date Notes: These timelines are based on the initial estimates. Final timelines shall be ascertained at appropriate time
CONTENTS OF THE OFFER DOCUMENT A Draft Offer Document is to be filed with BSE/NSE, through a Lead Merchant Banker, containing the following: 1 About the Company Detailed history since inception, its products and services, subsidiaries, group companies, dividend policy, etc. 2 About the Industry Detailed industry review in which the business operates including Strengths, Opportunities and possible limitations. 3 Objects of the Issue Information regarding Objects of the Issue and the basis of the price of the issue 4 Capital Structure Detailing about the evolvement of the present capital structure of the Company 5 Management Details about the management – promoters, directors, promoter group and group companies 6 Financials Restated financials for last 5 years, statement of tax benefits and material developments since last balance sheet 7 Issue Information Terms of the issue, structure, procedure, restrictions, etc. 8 Legal & Other Info. Details about outstanding litigations by and against the Company/its Promoters/Directors/Group Concerns, etc. 9 Regulatory Disclosures Regulatory and Statutory laws and disclosures relating to the Company 10 Other Information Material Contracts and documents for inspection 11
KEY REGULATIONS UNDER ICDR Migration to Main Board Market Making Lock – in Promoters holding For Minimum 3 years from up to 20% Post Issue Capital Post Issue capital date of listing to be locked in for a period of 3 years Entire Pre Issue Capital (Incl Inventory of Market maker Between Rs. 10 crs to 25 crs - persons other than should be at least 5% of Voluntarily Migration promoters) to be locked in proposed securities listed for 1 year Locked-in shares permitted Promoters shares can’t be Exceeds Rs. 25 crs - to be transferred inter se offered to market maker Mandatory Migration promoters incl. new during 3 years. promoter(s) 12
KEY POST LISTING COMPLIANCES Stock Exchange Website Half yearly and annual results as per Annual Report, Balance Sheets, P& L the Accounting Standards A/C Financial results – Unaudited within 45 Proceedings at AGM or EGM and audited within 60 days Half Yearly shareholding pattern within Notices and resolutions circulars , call 45 Days letters 13
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